FCC to vote to bar Huawei, ZTE from government subsidy program

By David Shepardson

WASHINGTON (Reuters) – The U.S. telecommunications regulator plans to vote in November to designate Huawei Technologies and ZTE (HK:) Corp (SZ:) as national security risks, barring their customers from tapping an $8.5 billion government fund to purchase equipment or services, officials said on Monday.The U.S. telecommunications regulator also plans to propose requiring U.S. rural carriers to remove and replace equipment from designated companies. It also plans at its Nov. 19 meeting to vote to ask carriers how much it would cost to remove and replace Huawei and ZTE from existing networks and to establish a reimbursement program to offset the costs of removing the equipment.

“When it comes to 5G and America’s security, we can’t afford to take a risk and hope for the best,” FCC chairman Ajit Pai said in a statement. “As the United States upgrades its networks to the next generation of wireless technologies — 5G — we cannot ignore the risk that the Chinese government will seek to exploit network vulnerabilities in order to engage in espionage, insert malware and viruses, and otherwise compromise our critical communications networks.”

This is the latest in a series of actions by the U.S. government aimed at barring U.S. companies from purchasing Huawei and ZTE equipment. Huawei and ZTE would have 30 days to contest the FCC’s national security risk designation.

Huawei and ZTE did not immediately respond to a request for comment.

Pai first proposed in March 2018 barring companies that posed a national security risk from receiving funds from the FCC’s Universal Service Fund, but did not name Huawei or ZTE. The fund provides subsidies to provide service in rural or hard-to-reach areas, and to libraries and schools.

The FCC argues the companies’ ties to the Chinese government and military apparatus and Chinese laws requiring that such companies assist the Chinese government with intelligence activities pose a U.S. national security risk.

Congress has been considering legislation to authorize up to $1 billion for small and rural wireless providers to replace network equipment from the Chinese companies.

About a dozen rural U.S. telecom carriers that depend on inexpensive Huawei and ZTE switches and equipment were in discussions with Ericsson (ST:) and Nokia (HE:) to replace their Chinese equipment, Reuters reported in June.

The United States has been pressing nations not to grant Huawei access to 5G networks and alleged Huawei’s equipment could be used by Beijing for spying, which the Chinese company has repeatedly denied.

In May, Trump signed a long-awaited executive order declaring a national emergency and barring U.S. companies from using telecommunications equipment made by companies posing a national security risk. The order directed the Commerce Department, working with other government agencies, to draw up an enforcement plan by mid-October. The Commerce Department has yet to publish a plan.

The U.S. government added Huawei to its economic blacklist in May, saying the Chinese company was involved in activities contrary to U.S. national security.

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